Information blackouts in a multi-echelon supply chain simulation

Abstract

Information blackouts, defined as sudden and short-duration failures of the information flow in a supply chain, amplify the bullwhip effect in supply chains. We develop a discrete-event simulation of a multi-echelon supply chain, utilizing Rockwell Automation's Arena software tool, to investigate this phenomenon. We investigate inventory order history blackouts of three different durations (1, 2, and 3 time periods). Based on the increased bullwhip effect observed as the result of an information blackout, managers may decide to “wait out” the amplification or to use an estimate to replace the missing inventory order history by utilizing the last known value. The latter choice employs the common manager's heuristic of trusting the recent past to be the best predictor of the future. Our results provide supporting evidence for such managerial decisions.